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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Kirk © who wrote (37737)	10/3/2000 2:14:43 PM
From: Kirk ©	Read Replies (1) \| Respond to of 70976

FED has no change in rates bias towards possible inflation... no change

To: Kirk © who wrote (37737)	10/3/2000 5:50:02 PM
From: Math Junkie	Read Replies (2) \| Respond to of 70976

Kirk, I think your 2¢ are worth at least four bucks. <G> I got out of the cycle too early, because I had ridden through two previous downturns, and was gun shy of doing so again. I had also gone into semi-retirement (if you'll pardon the expression), so it no longer made sense to have so much concentrated in one sector. When the market continued on to unprecedented P/Es in the face of an aggressive Fed, I took the last of my semiconductor equipment dollars off the table, and then watched the sector run up for another two to three months before keeling over. I recently estimated the tax impact from my last sale, which was KLAC, and determined that it has now gone down more than enough to make up for the taxes, even considering that 80% of my proceeds were gain, and short-term gain at that. Not sure if that is true of my earlier sales, but those represented asset allocation, not attempts to time the cycle. Your comment on the difficulty of picking the top in this sector is right on the mark. One of the problems is that one has to predict not just how the business will do, but one also has to predict the behavior of other investors. Things are complicated this time by the fact that the stock has been caught up in a general NASDAQ downdraft. One thing I would caution people about is using the depth of previous price declines to predict where the next major bottom might be for AMAT. It seems to me that the percentage of trough-to-peak price swing this time has been hugely greater than in previous cycles, which may make price action in previous cycles a poor predictor this time around. In addition, if the stock has been this weak with business still rip-roaring, imagine what will happen if we actually start to see slowing in the semiconductor industry. In past cycles, the time to buy has not come until after layoffs have been announced, and the news so far seem to indicate that layoffs are a long way off. I would especially caution against using that 67% pullback figure as a buying signal for LRCX. It has always been much more volatile than AMAT, and its last trough was way deeper than AMAT's. Finally, I would reiterate something from one of my posts of a couple of years ago. During the last downcycle, I asked the CFO of one of the major semi-equip companies when he thought the stock price would recover. Without hesitation, he replied, "When end-user demand recovers". From what I have seen of insider sales reports in previous cycles, while these guys never pick the top exactly, they do have a good general idea of which way things are going; they know when their stock is expensive, and they know when it is cheap. So I place a lot of credence in his advice, and beyond that it is logical to expect that investors are going to use the most leading indicator they can find, no matter how imprecise. So I think we need to keep a keen eye on those PC and cell phone sales, as well as the sales of other products that use semiconductors, for clues to how things are going.